2016 brought about abrupt political changes that will have consequences on the private equity and venture capital industry. We entered the new year with more questions than answers on the possible futures ahead of us.
First, the UK’s vote to leave the European Union is a major setback in an unprecedented 60 years history of European economic integration. It stands out as an event which will have rapid repercussions on the British economy, the European single market, but also on the strong interactions that the Luxembourg private equity and venture capital industry has had with the UK’s financial industry and investors.
Second, the unexpected election of Donald Trump as President of the United States further raises the level of uncertainty. How will Trump’s actions impact the political, regulatory and economic environment in which our members do business, both in our region and across the US? Trump’s promise to deregulate could facilitate business in the US and seems to bode well for GPs with investment activities there. However, Trump’s protectionist speech might spur already growing populist/nationalistic movements in Europe and make things worse in the long run for Europeans.
With increased uncertainty comes higher risk and opportunities for the most discriminate investors. This moment is also an opportunity for Luxembourg to become an even more diversified and important global PE hub, with a greater presence of front offices from some of the greatest managers.
In just a few years, LPEA has managed to grow from a handful of members to more than 140 by the end of 2016. In an environment of low interest rates and increased political and regulatory risk, Private Equity and Venture Capital funds provide not only the fuel of economic growth (growth financing to companies of all sizes) but also high returns to investors. Our industry can only grow in importance since it stands out as a force of economic progress, job creation in the real economy and innovation, but also as a highly desired alternative for investors. Indeed, the ability to spot opportunities and to take risk will continue to define successful GPs in the future.
The role of LPEA remains unchanged: remind stakeholders of our industry’s positive role and importance for the real economy, uphold the dialogue with all relevant public authorities, ensure the competitiveness of Luxembourg as Private Equity and Venture Capital hub, and defend a favorable tax and regulatory environment in Luxembourg and the European Union for PE-VC firms.
As an industry body we should not conclude without underlining that that the Luxembourg Government has been greatly supportive of our industry’s growth. A whole set of initiatives aims at accelerating Luxembourg’s foray into the forefront of Europe’s most progressive and innovative countries, for the benefit of the whole population. From a public commitment to join the Third Industrial Revolution based on Jeremy Rifkin’s recommendations, to a visionary push into FinTech and Space Mining– things are moving forward in the Grand-Duchy.
Jérôme Wittamer, Chairman of the LPEA